Paytm shares continued to bleed, trading 9 per cent further down early on February 14, and slipping below Rs 350 mark, as crisis looked far from over for parent One97 Communications.
In the last 10 trading days since the RBI ban was announced, the stock has lost about 55% of its value or Rs 26,000 crore in market capitalisation.
Shares of One 97 Communications has lost over 80 per cent of its value or Rs 1.17 lakh crore in market capitalisation in 27 months. The stock is now 84 per cent away from its IPO price of Rs 2,150.
The RBI placed restrictions on Paytm Payments Bank Ltd (PPB), an associate company of One97 Communications, saying the actions were warranted by “persistent non-compliances and continued material supervisory concerns in the bank”.
The regulator found major irregularities in KYC, which exposed the customers, depositors, and wallet holders to serious risks. In its probe, the regulator found that in thousands of cases, the same PAN was linked to more than 100 customers and in some cases to more than 1,000 customers. The total value of transactions, running into crores of rupees, is much beyond the regulatory limits in minimum KYC pre-paid instruments, raising money-laundering concerns.
The RBI directed PPB to stop accepting deposits, credit transactions or top-ups in customer accounts, prepaid instruments, wallets, FASTags, and NCMC cards after February 29, other than any interest, cashbacks, or refunds. It also ordered the payments bank to settle all pipeline transactions and nodal accounts by March 15.
In the two weeks since the RBI directive, foreign brokerages like CLSA, Morgan Stanley, Jefferies, Bernstein have cut their target prices for One 97 Communications (Paytm) by 20-60 per cent, with Macquarie the biggest bear on the Street. The agency has downgraded One97 Communications to ‘underperform’ and sharply cut the target price to Rs 275 from Rs 650.
Macquarie analyst Suresh Ganapathy believes the new-age stock was fighting for survival. “Post the recent regulatory changes and diktats, Paytm now faces a serious risk of an exodus of customers which significantly jeopardises its monetisation as well as its business model,” the brokerage said.
The brokerage said some of Paytm’s existing lending partners may take a re-look at their business links with the firm, which may potentially hurt its lending business revenues.
“Our channel checks with some lending partners reveal that they are re-looking at their relationship with Paytm which eventually could lead to a decline in lending business revenues in case partners scale down or terminate their relationship with Paytm. AB Capital, one of Paytm’s largest lending partners, has already pared down their BNPL exposure to Paytm from a peak level of Rs 2,000 crore to Rs 600 crore currently and is expected to go down further in our view,” it noted.
It was Macquarie, which came out with the first target price on Paytm, when the scrip got listed back in 2021. The brokerage had then suggested a target of Rs 1,200 on the stock just ahead of Paytm’s listing.
Last year, Macquarie had given a double upgrade to the Paytm stock, raising its target price to Rs 800. “There is very visible change in approach of management to deliver profit”, it had noted at the time.
In 2022, the fintech giant’s target price was Rs 450 with an ‘Underperform’ rating.
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